Silicon Insider: The Battle Between Intel and AMD

The greatest duel in modern business history has opened its latest front.

When you think of two tech companies standing toe to toe and exchanging punches for round after round, year after year, fight cards like Apple vs. Microsoft, HP vs. IBM, and Sony vs. Nintendo come to mind.

But to my mind, none compares with the three-decade-long, ongoing blood feud, fight to the death, cage match between Intel and Advanced Micro Devices for ownership of the high-end of the most important product on earth: the microprocessor.

This is a story that has everything: strange Oedipal relationships, lifelong feuds between tycoons, a "Bleak House"-type lawsuit that went on for more than a decade, billions of dollars at stake, government investigations into the strong-arming of customers, wild stock booms and crashes and some of the greatest examples of human ingenuity ever seen.

Someday, someone -- maybe me -- will write a book about Intel versus AMD … and it will read like the ultimate boardroom soap opera, only true.

Semiconductor Explosion

I've described the history of this feud before, so I'll just summarize. When the legendary Fairchild Semiconductor, the ur-company of modern Silicon Valley, exploded in the late 1960s, it scattered more than 100 new companies, like seed pods, all over the region.

The thoroughbred company of this new generation was Intel Corp., founded by Fairchild's general manager, Bob Noyce, and chief scientist, Gordon Moore. Both men were already living legends, having been part of the original team that invented the integrated circuit chip, and with Intel would go on to be among the most esteemed figures of the electronics age.

Noyce and Moore brought with them another scientist, a Hungarian refugee who was Fairchild's top applications guy, Andrew Grove. Grove had been fiery, arrogant and not very popular among all the cool young dudes that populated Fairchild (no one at the company was over 30). But Grove would also prove to be the greatest businessman of his generation.

Far more popular was Jerry Sanders, Fairchild's fast-talking, flamboyant Southern California sales guy. But Sanders also had the reputation of being a little too slick for his own good.

Not surprisingly, within hours after Noyce and Moore announced that they were starting a new company, they were approached by venture capitalists eager to invest. Sanders, meanwhile, slept on a friend's couch, fought with some of his partners, and took months to finally raise the minimum funding he needed to start AMD.

But Sanders had one thing that Grove didn't have: a mentor relationship with Noyce. And so, to help out his young disciple, Noyce not only acted as an early investor in Jerry's company but gave AMD the much-coveted right to be second-source supplier to Intel's products -- that is, a backup in case demand outsurged supply. Grove was not pleased.

The Intel Behemoth

None of this should have much mattered. Within a decade, Intel was not only the fastest-growing tech company in the world, but, thanks to its invention of the microprocessor -- the chip-level brain in every computer, game player and electronic device -- also the most important. AMD, meanwhile, carved out its own niche as a supplier of logic chips and as a brilliant marketer.

And then, as if the gods had preordained that neither company would ever escape a shared fate with the other, Sanders and AMD found themselves in serious financial trouble. AMD's crucial logic business was drying up -- and Sanders, facing disaster for his company -- cast about for a way out of his predicament.

He found it in that old second-source agreement with Intel. AMD announced that it was going into the business of cloning Intel microprocessors.

Intel, not surprisingly, was furious. Noyce, the father figure, was now dead, and Grove was in charge -- and thus what would have been a nasty legal fight anyway now took on a Cain and Abel dimension. And as one generation of microprocessors was replaced by another, and then another again, the vicious lawsuit between the two companies hinged on how an individual phrase in a 20-year-old agreement was to be parsed.

For Sanders, it was a fight for survival, and the famously flashy and eloquent salesman found himself trapped year after year in a bloody, soul-sucking slugfest. AMD's stock roller coastered for years -- it is still doing so -- creating fortunes and then wiping them out.

Grove, meanwhile, presiding over a skyrocketing comet, enjoying international acclaim, had to constantly deal with this perpetual nuisance that sometimes brought out the best in him (uncharacteristic rhetorical cleverness) and just as often the worst (bad PR and even worse court testimony).

Time's Man of the Year managed to look puny, prevaricating and petty, even as he was to be lauded, justly, for being exactly the opposite.

This tech lawsuit-of-lawsuits was finally settled, at first in secret, by the lieutenants of these two CEOs. And though Sanders and Grove were supposed to shake hands on the deal, I don't believe they ever did.

It's Not Over Till It's Over

But just because the lawsuit ended, it didn't mean an armistice in the war. On the contrary, if anything it became even more unrelenting and bloody. That's because even as Grove was retiring with all of his laurels, Sanders, now tired and scarred but undaunted, led AMD on one last assault on Intel's hegemony in microprocessors.

And this time he succeeded.

AMD, with its first Athlon chip, caught Intel nodding off -- and more important, Intel's customers, resentful of their poor treatment during the bubble -- and for first time in its quarter-century-long pursuit, AMD beat Intel to market with the next generation chip.

Stunned, Intel responded in the ways it knew best: lashed its labs to get its own next generation chip to market, publicly diminished AMD's achievement and put the screws to its customers (at least as much as it could with the Justice Department watching) not to bolt.

In the most telling example of the last, Microsoft chose to stick with Intel for its new game box despite the fact that AMD's Athlon was a far superior graphics chip. Sanders was enraged.

Intel's tactics worked, at least well enough to keep Intel on top of market. And so the war raged on -- though now the situation has changed in subtle, but remarkable, ways.

AMD, the copycat company of salespeople, now more often than not is the technology leader with a second-rate marketing and advertising program; while Intel, the innovative giant filled with boring engineers, is now, more often than not the second place company in technology with the world-class marketing.

Power Shifts, New Products

The latest news in this ongoing war took place just this week. Tuesday in Barcelona (chosen because the new chip was so code named) AMD unveiled its new quad-core -- multiple processors on a single chip is the hot new design feature -- Opteron processor.

This announcement follows closely on the heels of Intel's recent announcement of its own quad-core Xeon 7300MP chip. Intel claims its new chip is twice as fast as its predecessor, while still consuming less power. But the early consensus is that the Opteron is a better design because it saves power through a more efficient architecture rather than, as Infoworld described it, Intel's "process shrink." This, it is generally believed, will make the AMD chip more efficient and more scalable.

So, does AMD win this round? Not yet. Part of the fun of watching all this, like figures atop the Kremlin at the old May Day parades, is keeping track of the shifting power and loyalties. At Barcelona, it was noticed that Dell was on hand for the announcement (good news), but Microsoft was not (bad news). And AMD's shifting financial fortunes may keep it from fully supporting the Opteron the way it should. At $6 billion in annual sales, AMD just doesn't have the marketing firepower of $40 billion Intel.

Finally, and most important, the chip AMD showed at the announcement was a comparatively plodding 2 GHz version -- slower than the Xeon -- with the company promising a 2.5 GHz version (up from the predicted 2.3 GHz) later this year. The latter device is the one the market is hoping for, so AMD better produce or there will be hell to pay.

And so the war goes on. AMD has survived to fight another day. In this quarter-century war, Advanced Micro Devices has had to grow up and become a world-class company -- and in the process, it has kept Intel, always threatening to become a monopoly, honest. And though I suspect neither side would ever admit it, neither would be the companies they are today without the other.

And, as always with market competition, we consumers are the beneficiaries -- in this case with the most remarkable sustained run of technology innovation of them all.

TAD'S TAB -- If you're having a bad day, and are feeling particularly sinister, visit The Web site gives you a list of popular spam topics (Nigerian money laundering, work-at-home scams, etc.) and a submit bar for your nemeses' e-mail. But be careful, because their e-mail could be put on a spam list indefinitely. With great power comes great responsibility.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the bestselling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the Silicon Insider columnist since 2000.